Karachi: The Alhamra Islamic Asset Allocation Fund, managed by MCB Investment Management Limited, reported a significant decrease in net assets for the quarter ending September 30, 2026. The fund's net assets stood at Rs. 1,512 million, marking a 31.24% decline from Rs. 2,199 million at the close of the previous quarter on June 30, 2026. This downturn in net assets coincides with a challenging period for Pakistan's equity markets, where the KSE-100 Index dropped by 10,332 points, equating to a 5.7% year-to-date decline.
The quarterly report, dated October 30, 2026, highlighted a turbulent economic backdrop. The national current account deficit for the first two months of the fiscal year 2027 was USD 543 million, a reduction from USD 853 million in the same period the previous year. Despite a 4.0% increase in exports, the trade deficit grew by 18.8% year-on-year, propelled by an 11.4% rise in imports. Remittances showed resilience, increasing by 14.7% to USD 7.3 billion. The State Bank of Pakistan's foreign exchange reserves surged to USD 21.4 billion, up from USD 18.4 billion at the fiscal year's start. The local currency saw a moderate move, appreciating by 0.4% against the USD to a rate of 277.1.
Inflation, as measured by the Consumer Price Index, accelerated to an average of 10.2% for the first quarter of FY27, up from 4.3% the previous year. The uptick was largely driven by higher global oil prices, which impacted domestic fuel costs and caused widespread inflationary pressures.
According to information available from the Pakistan Stock Exchange (PSX), the equity market faced significant headwinds. The KSE-100 Index's decline was influenced by ongoing geopolitical tensions, particularly between the US and Iran, which affected oil prices and market sentiment. The expiration of the US-Iran Memorandum of Understanding and stalled peace talks exacerbated uncertainties, pushing Arab Light crude prices above USD 110 per barrel in September.
Despite some positive domestic indicators, including a credit rating upgrade by S&P Global Ratings and a stable interest rate policy from the State Bank of Pakistan, investor sentiment remained cautious. The market experienced major sell-offs from mutual funds, banks, and foreign investors, with net outflows of USD 64.2 million, USD 36.2 million, and USD 2.84 million, respectively. However, these outflows were mostly offset by inflows from individuals and corporates.
The Alhamra fund's performance mirrored the broader market challenges, delivering a return of -5.91% against a benchmark return of -3.14%. By the end of the quarter, the fund's equity allocation was 68.7%, primarily in Oil & Gas Exploration, Cement, and Pharmaceuticals. Cash investments accounted for 30.6% of the fund's portfolio. The Net Asset Value (NAV) per unit decreased by Rs. 13.156, from Rs. 222.4907 to Rs. 209.3345, over the quarter.
The report underscores the impact of both global and domestic factors on Pakistan's financial markets and the Alhamra Islamic Asset Allocation Fund's performance during a period of heightened economic uncertainty.